Banks take special one-year loan from ECB

The European Central Bank (ECB) said Wednesday that it has loaned 56.9 billion euros (65.3 billion U.S. dollars) of one-year-long loans to eurozone banks, less than experts' forecast amid the worsening debt turmoil. The ECB said a total of 181 banks apply for the 371-day loan, which was at the benchmark interest rate of 1.5 percent. The demand was weaker than expected, as analysts predicted that some 70 billion euros would be thrashed out when the central bank started to conduct such operations. At the monthly policy-setting meeting in early October, the ECB announced a series of non-standard measures to help struggling banks get enough liquidity to curb "unfavourable effects on financing conditions," including a refinancing operation with a maturity of approximately one year conducted in October and the other with a maturity of approximately 13 months in December. These special measures were reintroduced against a backdrop that European banks became reluctant to lend to each other with fears that the sovereign debt crisis, which is spreading to bigger economies like Spain and Italy, could escalate into a severe banking crisis. The ECB conducted such longer-term operations first in June 2009, when the international financial crisis swept the European financial market. At that time, some 1,100 eurozone banks asked for the life-saving cashes. Although the number of applicants is fewer than forecast, which could be some relief for investors, experts warned that more pressure would exert on banks in coming months, as European leaders are expected to ask banks to write down 50 to 60 percent of their Greek holdings, a bold gesture showing private sector has contributed to saving heavily indebted eurozone countries.